Due to the COVID-19 pandemic, many charities have been restricted from holding in-person fundraising events to support the mission of their organizations. Many have turned to online auctions or raffles for their important fundraising activities, but nonprofits need to be careful about following the rules for these online events so as not to jeopardize their tax-exempt status.
Gambling is illegal in Arizona and raffles are a form of gambling, but there are exceptions that have been carved out for some organizations, including nonprofits. The rules for holding a charity raffle in Arizona include all of the following:
- The charity must have been continuously in operation for at least five years prior to conducting a raffle.
- No member, officer, director, employee, or agent of the charity may benefit — directly or indirectly — from the raffle but can participate on an equal basis to any other participant in the raffle.
- Only a bona fide local member of the charity can participate directly or indirectly in the management, sales, or operation of the raffle.
- Online sales of raffle tickets must be made through a website owned and operated by the charity, with sales limited only to individuals located in Arizona.
Although not required by Arizona law, it is also a good idea for nonprofits to publish the rules for the raffle in all its promotional materials. Raffle rules should include eligibility (e.g., participants must be 18 years of age), ticket costs, prizes, dates, and contact information.
Raffles are a popular and effective way to raise money for causes, especially when in-person events are restricted. However, before running a raffle, a nonprofit must comply with Arizona’s rules governing how they operate. Consulting with legal counsel experienced in nonprofit law can ensure your charity stays on the right side of the law while doing important fundraising.
Provident Law’s nonprofit attorneys can help churches and religious organizations to avoid crossing the line out of tax exemption. We stand ready to counsel and serve churches, charities, and foundations, as well as private schools, colleges, universities, and other types of nonprofit organizations—providing broad transactional and general counsel services in Arizona and surrounding areas. Contact us to learn more.